MAS keeping close watch on US debt ceiling crisis

PHOTO: MAS keeping close watch on US debt ceiling crisis

Singapore's The Monetary Authority of Singapore (MAS) said on Thursday it "will take action, if needed, to safeguard the purchasing power of Singapore's reserves".

Responding by e-mail to queries from The Straits Times, it said the Republic's reserves are diversified, across a basket of currencies and assets.

MAS' official reserves were about $336 billion, or US$268 billion last month.

According to the US Treasury Department's website, Singapore held US$81.5 billion in US Treasury bonds as of July - just under one-third of Singapore's total foreign reserves - US$261.095 billion (S$327 billion) - that month. The Republic is the 14th largest holder of US Treasury bonds after China, Japan, Taiwan and Hong Kong, among others. The list includes a grouping of oil-producing nations.

The risk of a US debt default looms as an Oct 17 deadline for Congress to lift the debt ceiling draws closer.

"MAS adopts a medium term investment view in managing these portfolios... (and) closely monitors all market developments," said MAS.

Local banks are not overly worried. A DBS spokesman said the bank is "not unduly concerned about its direct exposure, but remains watchful for spillover effects on the financial markets".

Mr Leslie Tay, UOB's executive director for global markets and investment management, said the bank is mindful US government credit ratings could be downgraded but is "prepared to deal with any potential credit adjustments".

Mr Jason Ho, head of asset liability management at OCBC Bank, said US Treasuries "form only a small proportion" of the bank's asset portfolio.

CIMB economist Song Seng Wun said US Treasuries are vital to the global system. "Central banks everywhere are probably drawing up their worst-case contingency plans... people are still trying to grapple with the chain of events that could unravel the global financial system."